The 10-year bonds of Gator Corporation are yielding 8 percent per year. Treasury bonds with the same maturity are yielding 6.4 percent per year. The real risk-free rate (k*) has not changed in recent years and is 3 percent. The average inflation premium is 2.5 percent and the maturity ris premium takes the form: MRP = 0.1%(t - 1), where t = number of years to maturity. If the liquidity premium is 0.5 percent, what is the default risk premium on the corporate bond?
Q: Ninja Co. issued 14-year bonds a year ago at a coupon rate of 6.9 percent. The bonds make semiannual…
A: Current price of the bond is the sum of present value of maturity value of bond value and present…
Q: O'Brien Ltd.'s outstanding bonds have a $1,000 par value, and they mature in 25 years. Their nominal…
A: Nominal Coupon interest Rate = Annual Interest / Bond Par Value Present Value of cash flows =…
Q: ABC Motors' bonds have 19 years remaining to maturity. Interest is paid semi-annually, they have a…
A: Data given:: Par Value = $1,000 Coupon interest rate = 5% (paid semi-annually) = 5%/2 = 2.5% = 0.025…
Q: A company's 5-year bonds are yielding 8.95% per year. Treasury bonds with the same maturity are…
A: Default risk premium on corporate bond can be calculated by using this equation Yield = real…
Q: What is the yield to maturity? For the coming year, what are the expected current and capital…
A: Yield to maturity refers to the total return expected on the bond till it matures.
Q: A company’s 5-year bonds are yielding 7% per year. Treasurybonds with the same maturity are yielding…
A: Computation:
Q: McConnell Corporation has bonds on the market with 15.5 years to maturity, a YTM of 6.2 percent, a…
A: Coupon rate:The coupon rate is the rate of yield provided by the fixed-income securities and it is…
Q: A company's 5-year bonds are yielding 7.4% per year. Treasury bonds with the same maturity are…
A: Default Risk Premium is the premium on return that an investor anticipates in addition to the return…
Q: Last year Carson Industries issued a 10-year, 15% semiannual coupon bond at its par value of $1,000.…
A: Yield: This is the earning power or the income generated through an investment. In bond market,…
Q: For at least the next 10 years, the real risk-free rate of interest, r*, is expected to remain at…
A: The question is based on the concept for determination of interest rate with risk premium model. The…
Q: what is the current bond price?
A: Bond valuation is the method of finding the fair value of the bond. Fair value means the present…
Q: Four years ago, Vulcan Ltd. issued a 20-year $1000 par value bond that pays $40 semi-annual coupon…
A: Solution:- Bonds are the debts raised by the coupon. Bond holders are paid a fixed coupon…
Q: ConEdison Utility Company has four-year bonds outstanding that pay a coupon rate of 6.6% and make…
A: Yield to maturity of the company will be reflective of the required rate of return for investor in…
Q: Westco Co. issued 15-year bonds a year ago at a coupon rate of 5.4 percent. The bonds make…
A: A Bond refers to an instrument that represents the loan being made by the investor to the company…
Q: A company's 5-year bonds are yielding 8.25% per year. Treasury bonds with the same maturity are…
A: The risk-free rate of return is the theoretical rate of return of an investment with zero risks. The…
Q: Gabriele Enterprises has bonds on the market making annual payments, with 20 years to maturity, a…
A: The Par value of the bond is $1,000. The price of the bond is $850. The yield to maturity is 7%. The…
Q: What is the yield to maturity on these bonds?
A: Yield to maturity or the interest rate of the bond refers to the rate of interest earned till the…
Q: Wesimann Co. issued 15-year bonds a year ago at a coupon rate of 8.7 percent. The bonds make…
A: Calculation of Current Bond Price:The bond is issued a year ago so the bond duration is 14 years.The…
Q: What is the current market price of these bonds?
A: Information provided: Term to maturity: 10years Future value: $1000 Coupon payments: $80 Yield to…
Q: Suppose that five years ago a corporation issued a 9-year bond with a coupon rate of 6.50% and the…
A: Bond price With coupon payment (C), period (n), yield (r) and face or par value (F), the bond price…
Q: O'Brien Ltd.'s outstanding bonds have a $1,000 par value, and they mature in 25 years. Their nominal…
A: Given the following information: Face value (M): $1,000 Selling price (P): $850 Yield to Maturity:…
Q: A company's 5-year bonds are yielding 8.35% per year. Treasury bonds with the same maturity are…
A: Formulas: Yield = real risk-free rate + average inflation premium + maturity risk premium +…
Q: Company B has a bond outstanding that pays a 8% coupon. The interest is paid semi-annually, and the…
A: Current yield can be calculated by dividing the coupon amount with current selling price of bond.…
Q: Time Warner has bonds that are selling for $1,371. The coupon interest rate on the bonds is 9.15…
A: Given details are : Face value (Par value) of bond = $1000 Current Selling price of bond = $1371…
Q: Gabriele Enterprises has bonds on the market making annual payments, with 12 years to maturity, a…
A: Face value = $1,000 Price of bond = $820 Yield to Maturity = 11% Time Period = 12 Years
Q: Crane, Inc., has four-year bonds outstanding that pay a coupon rate of 7.00 percent and make coupon…
A: The calculation of yield to maturity is shown below:
Q: Thatta, Inc., has 7 percent coupon bonds on the market that have 10 years left to maturity. The…
A: Computation:
Q: Glacier Industries has bonds on the market making annual payments, with 14 years to maturity, and…
A: A coupon is a periodic amount paid by the bond issuer to the bond holder as a fixed percentage of…
Q: Nungesser Corporation has issued bonds that have a 9 percent coupon rate, payable semiannually. The…
A: This question require us to compute the price of the bonds from below given details: Coupon rate =…
Q: Jackson Corporation's bonds have 10 years remaining to maturity. Interest is paid annually, the…
A: Bond is a long-term debt instrument which is used by organizations to raise debt from…
Q: Jackson Corporation’s bonds have 10 years remaining to maturity. Interest is paid annually, the…
A: Price of bonds is persent value of all coupons and persent value of face/par value of bond. Formula…
Q: Page Enterprise has bonds on the market making annual payments, with 9 years to maturity, and…
A: We require to calculate the coupon rate using following details in this question: Present value…
Q: Jackson Corporation’s bonds have 12 years remaining to maturity. Interestis paid annually, the bonds…
A: Computation:
Q: Gabriele Enterprises has bonds on the market making annual payments, with seven years to maturity, a…
A: Coupon rate = coupon amount / Face value
Q: Verbrugge Company has a level-coupon bond outstanding that pays coupon interest of $120 per year and…
A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…
Q: Madsen Motors’s bonds have 23 years remaining to maturity. Interestis paid annually, they have a…
A: using financial calculator N (no. of years) =23 I/Y (rate)= 11% PMT (coupon payment) = 1000*9% =-90…
Q: Sanibel Industries has $1000 par value bonds with a coupon rate of 7% per year making semiannual…
A: Par Value = 1000 Semi Annual Coupon Payments Coupon = Coupon Rate / 2 * Par Value = 7%/2 * 1000 = 35…
Q: Ford Motor Co. has BB rated bonds outstanding that mature in 18 years, and have a 8.000% coupon…
A: FORD MOTOR CO SEMI ANNUAL COMPOUNDING Yield to maturity (18*2) 36 coupon amount…
Q: HKABC Limited. has bonds on the market with 13 years to maturity, a yield-to-maturity of 9.2…
A: Working note:
Q: XYZ Company currently has bonds outstanding with a face value of $1,000 that mature in 18 years. The…
A: Bonds: Bonds are the liabilities of the company which is issued to raise the funds required to…
Q: annual coupon rate
A: Introduction: Coupon rate can be defined as the interest which is paid to the bondholders & such…
Q: BEST Company bonds are yielding 12% and will mature in 10 years from now. The coupon rate is 14%…
A: Price of the bond = Coupon Amount * PVAF ( Semi annual rate, Number of periods ) + face value * PVIF…
Q: Lydic Corporation has bonds on the market with 15.5 years to maturity, a YTM of 7.6 percent, a par…
A: Calculation of annual coupon rate: The annual coupon rate is 8.30%.Excel spreadsheet:
Q: GAMA Corp has issued bonds that have a 10% coupon rate, payable semiannually. The bonds mature in 8…
A: Answer and calculations are given below
Step by step
Solved in 2 steps with 2 images
- A company's 5-year bonds are yielding 10% per year. Treasury bonds with the same maturity are yielding 5.8% per year, and the real risk-free rate (r*) is 2.85%. The average inflation premium is 2.55%, and the maturity risk premium is estimated to be 0.1 × (t - 1)%, where t = number of years to maturity. If the liquidity premium is 0.4%, what is the default risk premium on the corporate bonds? Round your answer to two decimal places.Given the following data, find the expected rate of inflation during the next year. r = real risk-free rate= 2.20%. Maturity risk premium on 10-year T-bonds = 2%. It is zero on 1-year bonds, and a linear relationship exists. Default risk premium on 10-year, A-rated bonds = 1.5%. Liquidity premium = 0%. Going interest rate on 1-year T-bonds = 4.80%. 3.0% 2.2% 2.8% 2.6% O 2.4%A company’s 5-year bonds are yielding 7% per year. Treasurybonds with the same maturity are yielding 5.2% per year, and the real risk-free rate (r*) is2.75%. The average inflation premium is 2.05%, and the maturity risk premium is estimatedto be 0.1 x (t - 1)%, where t = number of years to maturity. If the liquidity premium is0.7%, what is the default risk premium on the corporate bonds?
- A company's 5-year bonds are yielding 7.75% per year. Treasury bonds with the same maturity are yielding 5.2% per year, and the real risk free rate (r*) is 2.3%. The average inflation premuim is 2.5% and the maturity risk premium is estimated to be 0.1X(t-1) % where t= the number of maturity. If the iquidity premium is 1% what is the default risk premium on the corporate bonds.? Please show formula and calculation. Do it in manual computation not in spreadsheet.The real risk-free rate, r*, is 2.15%. Inflation is expected to average 1.65% a year for the next 4 years, after which time inflation is expected to average 3.6% a year. Assume that there is no maturity risk premium. An 11-year corporate bond has a yield of 8.85%, which includes a liquidity premium of 0.75%. What is its default risk premium? Do not round intermediate calculations. Round your answer to two decimal places. %The real risk-free rate, r*, is 1.7%. Inflation is expected to average 1.4% a year for the next 4 years, after which time inflation is expected to average 4.4% a year. Assume that there is no maturity risk premium. A 9-year corporate bond has a yield of 11.0%, which includes a liquidity premium of 0.2%. What is its default risk premium? Do not round intermediate calculations. Round your answer to two decimal places. 3.2 % Hide Feedback
- The real risk-free rate (r*) is 2.8% and is expected to remain constant. Inflation is expected to be 4% per year for each of the next two years and 3% thereafter. The maturity risk premium (MRP) is determined from the formula: 0.1(t – 1)%, where t is the security’s maturity. The liquidity premium (LP) on all Global Satellite Corp.’s bonds is 0.55%. The following table shows the current relationship between bond ratings and default risk premiums (DRP): Rating Default Risk Premium U.S. Treasury — AAA 0.60% AA 0.80% A 1.05% BBB 1.45% Global Satellite Corp. issues 15-year, AA-rated bonds. What is the yield on one of these bonds?The real risk-free rate (r*) is 2.8% and is expected to remain constant. Inflation is expected to be 3% per year for each of the next two years and 2% thereafter. The maturity risk premium (MRP) is determined from the formula: 0.1(t – 1)%, where t is the security’s maturity. The liquidity premium (LP) on all Moq Computer Corp.’s bonds is 0.55%. The following table shows the current relationship between bond ratings and default risk premiums (DRP): Rating Default Risk Premium U.S. Treasury — AAA 0.60% AA 0.80% A 1.05% BBB 1.45% Moq Computer Corp. issues 15-year, AA-rated bonds. What is the yield on one of these bonds? Disregard cross-product terms; that is, if averaging is required, use the arithmetic average. 7.68% 6.28% 5.55% 7.13% Based on your understanding of the determinants of interest rates, if everything else remains the same, which of the following will be true? The yield on a AAA-rated bond will be lower than…The real risk-free rate (r*) is 2.8% and is expected to remain constant. Inflation is expected to be 4% per year for each of the next four years and 3% thereafter. The maturity risk premium (MRP) is determined from the formula: 0.1(t - 1)%, where t is the security's maturity. The liquidity premium (LP) on all Gauge Imports Inc.'s bonds is 0.55%. The following table shows the current relationship between bond ratings and default risk premiums (DRP): Rating Default Risk Premium U.S. Treasury AAA 0.60% AA. 0.80% 1.05% A. ВB 1.45% Gauge Imports Inc. issues 12-year, AA-rated bonds. What is the yield on one of these bonds? Disregard cross-product terms; that is, if averaging is required, use the arithmetic average. 5.25% 8.58% 8.03% 7.48% Based on your understanding of the determinants of interest rates, if everything else remains the same, which of the following will be true? A AAA-rated bond has less default risk than a BB-rated bond. The yield on a AAA-rated bond will be higher than the…
- The real risk-free rate (r*) is 2.8% and is expected to remain constant. Inflation is expected to be 6% per year for each of the next two years and 5% thereafter. The maturity risk premium (MRP) is determined from the formula: 0.1(t-1) %, where t is the security's maturity. The liquidity premium (LP) on all National Transmissions Corp.'s bonds is 1.05%. The following table shows the current relationship between bond ratings and default risk premiums (DRP): Rating U.S. Treasury AAA AA A BBB O 5.25% O9.49% National Transmissions Corp. issues 7-year, AA-rated bonds. What is the yield on one of these bonds? Disregard cross-product terms; that is, if averaging is required, use the arithmetic average. 10.54% Default Risk Premium 9.94% 0.60% 0.80% 1.05% 1.45% Based on your understanding of the determinants of interest rates, if everything else remains the same, which of the following will be true? O The yield on U.S. Treasury securities always remains static. O In theory, the yield on a bond…The real risk-free rate (r*) is 2.8% and is expected to remain constant. Inflation is expected to be 4% per year for each of the next four years and 3% thereafter. The maturity risk premium (MRP) is determined from the formula: 0.1(t – 1)%, where t is the security’s maturity. The liquidity premium (LP) on all Rink Machine Co.’s bonds is 1.05%. The following table shows the current relationship between bond ratings and default risk premiums (DRP): Rating Default Risk Premium U.S. Treasury — AAA 0.60% AA 0.80% A 1.05% BBB 1.45% Rink Machine Co. issues fourteen-year, AA-rated bonds. What is the yield on one of these bonds? Disregard cross-product terms; that is, if averaging is required, use the arithmetic average. 7.94% 9.24% 8.19% 5.95% Based on your understanding of the determinants of interest rates, if everything else remains the same, which of the following will be true? An AAA-rated bond has less default risk than a…The real risk-free rate (r*) is 2.8% and is expected to remain constant. Inflation is expected to be 8% per year for each of the next four years and 7% thereafter. The maturity risk premium (MRP) is determined from the formula: 0.1(t – 1)%, where t is the security’s maturity. The liquidity premium (LP) on all Pellegrini Southern Inc.’s bonds is 0.55%. The following table shows the current relationship between bond ratings and default risk premiums (DRP): Rating Default Risk Premium U.S. Treasury — AAA 0.60% AA 0.80% A 1.05% BBB 1.45% Pellegrini Southern Inc. issues fifteen-year, AA-rated bonds. What is the yield on one of these bonds? Disregard cross-product terms; that is, if averaging is required, use the arithmetic average. 11.42% 12.82% 12.27% 5.55% Based on your understanding of the determinants of interest rates, if everything else remains the same, which of the following will be true? Higher inflation expectations…